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Are investment consultants any good?

  • Posted by: ,  Administrator
  • 11 June 2015
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Do consultants add value? How do you measure consultants "alpha"? These are amongst our most popular topics in the "investment consultants" section of our site. Here is a taster:

1. Picking winners? Investment consultant's recommendations of U.S fund managers 

How good are investment consultants at manager selection? Can consultants identify those asset managers who will add value to a portfolio? This paper reveals the results of an empirical study to understand the drivers behind consultant recommendations. What bearing do consultant recommendations have on manager inflows? And do these selections result in added value for pension plans?

2. Decoding Investment Consultant Alpha (2013)

This paper takes a somewhat jaundiced view of the consulting profession, but nevertheless is worth a read to understand potential issues through the eyes of a client. Written in the form of a letter, this is a commentary on the decisions of an investment consultant during the early years after being newly appointed, The letter bemoans the incompleteness of consultant reports and complains that the plan sponsor is unable to ascertain whether or not the consultant is adding value or not.

3. US Investment Consultants: A report for Fiduciaries, Audit and Risk Professionals (2013)

This report examines Diligence Review Corporation examines the scope for conflicts of interest amongst investment consulting firms serving US pension plans. It argues that most AUM advised by consultants is subject to conflicts of interest. It describes how the firm structure, business model or practices of investment consultants can potentially create conflicts.